Chinese online video site Tudou will establish a joint venture with Chinese peer LeTV.com, in an effort to reduce the surging content costs.
LeTV will hold 51% stake in the new joint venture while Tudou takes 49%, according to an official announcement from LeTV.
The new company will tasked with purchasing and reselling Chinese copyright video contents such as films and soap operas. Tudou has pledged to share at least RMB 50 million advertising revenue every year with LeTV for streaming the content jointly purchased. The two companies have also launched the domain tudou.letv.com, which simply redirects to Tudou.com for the moment.
Copyright purchases has become one of the biggest costs for China’s online video websites as publishers and regulatory agencies have taken action against websites that pirate video content. Youku estimated in July that its costs for copyright purchases are expected to rise 50% this year.
Xunlei, a Chinese download client and video site, withdrew its plans for a public listing in the US on Thursday, citing a weak market environment, but it presumably also faced increasing concerns over copyright issues.
The partnership between Tudou and LeTV also gives Sina the possibility to expand its business in video. The company acquired a 9% stake in Tudou in August and is testing its own social TV services Kandian.com.
LeTV is the ninth-largest online video website in China, taking 4.8% of the market share in Q2, according to figures from Beijing-based research firm Analysys International. But the company has a strong subscription business similar to Netflix that provides paying users with high-quality videos.
Shares of LeTV, listed on China’s domestic growth enterprises market (GEM), surged 3.69% in China today.